GRAIN traders and advisers are predicting little movement in the price across all grains in the first quarter of 2017.
Australia is set to produce a record winter crop of 52.4 million tonnes, according to the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) in its latest Australian Crop Report.
This will flow into a massive 2577mt stock level predicted by the United Nations Food and Agricultural Organisation.
Despite the record grain stockpile, Clear Grain Exchange managing director Nathan Cattle said premiums in wheat were still available.
Mr Cattle said while global stocks were at their highest levels in 10 years, high protein wheat was not as abundant.
"The volumes out of the Black Sea are there but the quality can be suspect," he said.
According to the Australian Export Grains Industry Council (AEGIC), Russia harvested a record 71.9mt in 2016 and has increased its winter wheat plantings by 1 per cent.
The Ukraine increased its wheat plantings by 4pc, which could see the country produce close to 80mt this year.
Mr Cattle said world consumption was also growing and expected to reach new records in 2017.
"This could draw down stocks relatively quickly in the event of a production issue somewhere in the world," he said.
CBH head of trading and marketing Trevor Lucas predicted a "bearish market" for wheat in 2017 on the back of the high global stockpile.
However, there were advantages for WA growers with east coast farmers struggling to keep up with their big harvest.
"This is the first good harvest in about three years for the Eastern States and they aren't geared up for large harvests like we are here in WA," he said.
"Shipping slots are tight so that will help keep prices buoyant and offer opportunities for WA growers."
Mr Lucas said after three years of poor to average seasons, the Eastern States were presenting as WA's main competitor.
He said growers there were happy to sell at the lower prices offered versus the majority of WA growers who had enjoyed above-average seasons.
This had led to WA growers enjoying an improved farm equity position and being able to afford to wait for prices to rise.
Mr Lucas said globally opportunities had increased after the Indian government decided in December to remove its wheat tariff, which had been at 10pc, and China's demand for barley grew.
"The removal of tariffs for imported wheat into India could help values however there are some phytosanitary, ergot and methyl bromide restrictions that needed to be considered," he said.
Mr Lucas said while the huge corn crops globally had dragged the feed barley price down to its lowest number in decades, China was in the market for malting barley.
Demand had been soft for the second half of 2016 but was expected to improve in the first quarter of the new year.
This could be reassuring as Australia is set to smash its 10.4mt record set in 2003-04 - and is estimated to produce between 11-12mt, with WA producing about 3.1mt of that this season.
Prices for conventional and genetically modified (GM) canola varieties are expected to remain at current levels, although there could be an increase in canola plantings in WA based on the good returns if there was a good season break for 2017.
"Canola continues to deliver higher yields and oils - where 42-44pc used to be the norm, this has increased to 45-47pc and higher yields," Mr Lucas said.
"We can also expect the about $40 per tonne premium to remain on non-GM canola."
While lupins have enjoyed a resurgence in WA this year, he said a bearish international soybean market meant lupins had to be priced competitively in order to find a home.
Grains Industry Association of WA (GIWA) estimates more than 750,000t of lupins were harvested this season, up almost 70pc on last year's crop.
"We're hopeful that the price will hold but lupins are a struggle and we'll need to find a new demand," he said.
Bunge regional manager Chris Tyson said the Australian dollar would continue to have a notable effect with further reductions strengthening local prices.
"The canola balance sheet looks a bit more friendly to local growers with the levels of sales for Australian canola looking somewhat supportive to prices in the short to medium term," he said.
"One thing to note is due to the large sales program to Europe, WA canola is trading at a significant premium to the east coast."
Mr Tyson said short-term prices would be volatile across all grain types as traders look to match different sales with alternative Australian origins.
"Protein wheat is likely to be better supported for the first quarter of 2017 than lower quality wheat, as this end of the balance sheet for protein remains tighter," he said.
"Large sales program of canola should see values relatively well supported due to the smaller than expected Canadian crop and tight west coast Canada capacity."
Market Ag director Richard Vincent said higher input costs for the 2016 crops and the lower cereal prices meant modest profits to date, but larger production totals had helped offset the poor cereal prices and the canola income was very significant with reasonable prices and high oil bonuses.
"The market is incentivising farmers to grow more canola in 2017 with the canola to wheat price ratio over 2.1:1, which is well above average," he said.
"With central and eastern growers having wind in their sails from a good canola season this year, all we need is stored moisture in the lead-up to seeding to see a canola seeding bubble in 2017.''
However, he said growers should be careful not to make significant rotation changes based on current market prices.
"Growers who tweak or change their long-term rotation plan based on a market price early in the year should consider carefully how to protect that decision to ensure the profitability of that decision is maintained," he said.
